Angolan government gains budgetary margin with payment of debts to Brazil

26 December 2019

The advance payment of Angola’s debts to Brazil has given the Angolan State Budget (OE) in 2020 some financial leeway, according to studies office of Banco Fomento Angola (BFA).

The office’s weekly bulletin said that the additional budgetary margin will amount to US$400 million per year, if over the next year the average price of a barrel of Brent remains at the US$55 set out in the State Budget for 2020.

This is because, according to the BFA, the debt with the National Bank of Economic and Social Development (BNDES), owned by the Brazilian state, “was tied to a guarantee of earnings of 0.02 million (20,000) barrels (of oil) per day.”

“Thus, the Treasury gains some room for manoeuvre with those revenues,” said the BFA.

The Angolan State paid US$589 million in advance to Brazil, liquidating its obligations related to financing agreements with the National Treasury and the BNDES that were due to mature in 2024.

In the recent financial relationship between the governments of the two countries, Angola’s total debt to Brazil reached US$5.0 billion, and the two countries signed six memoranda of understanding between 2005 and 2017 to increase the amounts of funding for Brazilian exports, backed by oil guarantees by the Angolan government.

The BNDES financed 84 operations in Angola that totalled US$4.4 billion, through a Finame credit line, which were guaranteed by the federal government through Export Credit Insurance, and the balance now paid totalled approximately US$581 million.

The Angolan Minister of State for the Economy, Manuel Nunes Júnior, recently said that more than half of the Angolan 2020 State Budget, approved this month, in the amount of approximately 15 billion kwanzas (more than €27 billion), is earmarked for payment of public debt, with a weight of 90% of GDP.

“The burden of debt in relation to GDP [Gross Domestic Product] was only 30% in 2013, but now stands at 90%. This is a fairly large change, that we should be concerned about,” he said.

The State Budget for 2020 forecasts Gross Domestic Product growth of 1.8% and a budget surplus of 1.2% of GDP.

According to the BFA, the budget is relatively prudent and feasible, considering the relatively conservative Brent outlook.”

However, it said, the forecast for the production of oil (1.44 million barrels per day) is “somewhat optimistic, given the current level of production (below 1.40 million barrels per day) and the short-term outlook.” (macauhub)